Israeli President Shimon Peres says Israel is heading toward early elections after prime minister-designate Tzipi Livni failed to form a coalition government. VOA Jerusalem correspondent Luis Ramirez reports the elections could lead to a change of direction for the Palestinian peace negotiations.

President Shimon Peres told Israeli lawmakers there is no choice but to hold elections, after Foreign Minister Tzipi Livni gave up efforts to form a coalition government.

Peres spoke at the opening of the winter session of the Knesset, Israel's parliament.

He said Israel will start a decisive election campaign in the coming days.

The election may bring a clear change of direction for negotiations with the Palestinians. The U.S.-sponsored talks have been going on for almost a year, but remain stuck on the key issues including Palestinian refugees, and the status of Jerusalem, which both sides claim as their capital.

The poll will pit Livni's ruling centrist Kadima party against the Likud Party of right-wing opposition candidate Benjamin Netanyahu.

Livni is a pragmatist who favors negotiation, and has spoken of a need to make territorial concessions in return for peace.

Netanyahu also wants to negotiate, but opposes handing over territory that Israel gained in the 1967 Arab Israeli War. He launched his campaign at the Knesset, promising that any future agreement with the Palestinians will not include handing over parts of the West Bank and the Golan Heights.

He said Jerusalem will not be up for negotiation in any talks he has with the Palestinians.

His remarks prompted angry shouts from Arab-Israeli lawmakers.

Once the Knesset formally approves plans for the poll, the election will likely be scheduled for early 2009 - more than a year ahead of schedule.

The winner will replace Prime Minister Ehud Olmert, who resigned in September as he faced corruption allegations. He remains in office as a caretaker until a new government is in place.